Despite signs of flickering economic recovery, stress lingers on many employees’ minds, causing some to lose precious work time fretting and others to feel effects on their health. And while employers are responding with targeted benefit initiatives, budget restraints still loom large, new research by Watson Wyatt and the National Business Group on Health indicates.

A worrisome 42% of employers are witnessing an increase in their workers’ use of the company health plan, according to the 2009 Staying@Work Report. Further, almost half (47%) of employers are seeing an uptick in their employees’ use of the employee assistance program (perhaps a silver lining, given some workers’ reluctance to reach out for help when they need it). Additionally, 30% of employers have noted an increase in workers filing disability claims. Meanwhile, unplanned absence is elevating among workers at 22% of U.S. companies.

To offset these trends, some employers are strengthening their benefit programs and initiatives. Despite tightening budgets, more than half (51%) of companies are planning to hold the line on benefit offerings or approve modest increases for health and productivity programs. Some 44% are planning cuts. Promisingly, nearly three-quarters (72%) of employers have already enhanced their onsite offerings with programs geared toward stress management, EAPs, or health coaches, or expect to do so within the next 12 months.

Success stories do exist. For example, Alliance Data, a Dallas-based provider of retail credit card services, marketing support and loyalty programs, used dynamic, on-site programs to encourage employees to improve their health and productivity. With support for weight management and smoking cessation as well as small, but significant changes to the company’s culture, such as vending machines with healthy food choices and ergonomically correct workstations, as well as “Lunch and Learn” sessions aimed at specific health topics, they saw a dramatic decline in therapeutic expenses.

Further, by mixing up the choices of wellness activities open to workers each year, they noted that the number of days missed from work due to illness or injury in the previous 12 months decreased 10.3%. Productivity loss on the job due to health problems decreased 14.6%, from 8% in 2004 to 6.83% in 2007. The average annual cost for productivity loss for one employee dropped by nearly 15%.

“We don’t want associates to get too used to the status quo—we have new choices and new expectations for them every year. We think vitality is key to the program’s success. Participation rates are very high and stable. In our lowest year, it was 86% and our highest was 95%,” explains Calvin Hilton, vice president of Benefits and HR Services.

Still, for the majority of employers, more work needs to be done in addressing employee stress levels.

“Companies are finding some relief from high benefit costs by investing in programs that improve the health of their workers,” observes Shelly Wolff, national leader of health and productivity consulting at Watson Wyatt. “Workers who haven’t lost their jobs are under great amounts of stress and are increasingly turning to their employer for advice, treatment or assistance that goes beyond basic coverage when they get sick. Still, employer initiatives that effectively deal with stress are limited.”

Although 78% of employers cite excessive work hours as the leading cause of employee stress, only 21% of employers say they are taking action to address it properly.

In the same vein, 68% of employers reported lack of work/life balance as the leading stressor, yet only 38% are putting in place the necessary programs and initiatives to counterbalance these trends. Another leading cause of stress, fear of job loss, is claimed by 67% of employers but only 41% of companies are actively addressing the issue.

“Not only are stressed workers less productive, they are also likely to incur higher health costs for themselves and their employer,” says Helen Darling, president of the National Business Group on Health. “Companies [that are] most effective at mitigating the impact of stress are moving in the right direction — helping employees become more efficient while working to lower benefit costs and strengthen balance sheets.”

The Dow Chemical Company was able to save 7,000 workdays that would otherwise have been lost due to injuries and illnesses, saving them $9 million in gained productivity in the United States in 2008. They succeeded by translating a company-wide strategy into tailored site-specific tactics. They also measure their risks and results in detail with health-related productivity gains, health risk factors, and benchmark comparisons. They monitor environmental influences on their employee population through a Healthy Workplace Index, which includes a stress risk assessment.

In the end, health care costs increased by 2.4% in 2008, as compared to a national benchmarked average of approximately 6.3%. By keeping this cost inflation below average, Dow saved an estimated $11 million on U.S. health care costs.

A free white paper, Extreme Productivity? Are Your Employees Hitting the Wall?, is available online to help employers find practical means to help their workers deal with stress.